Late last month, Governor Phil Murphy passed legislation calling for the gradual increase of the state’s minimum wage from $8.85 per hour as of January 1, 2019, to $15.00 per hour by January 1, 2024. The first jump in hourly minimums is set to take effect this July, when minimum wages paid by most business owners will rise to $10.00 per hour. There are a number of considerations that small business owners and employees alike must take into account with the newly-passed legislation, but we have summarized the most significant takeaways below:
- Shore Businesses Catch a Break – The legislation gives some leeway to seasonal businesses, which are defined by the legislation under three potential categories:
- Any business “who exclusively provides its services in a continuous period of not more than ten weeks during the months of June, July, August, and September” (for those of you currently counting on your fingers, there are fourteen weeks between Memorial Day and Labor Day).
- Any business in which at least two thirds of annual receipts in the previous calendar year were earned in a period not to exceed sixteen weeks (collective sigh of relief from every small business owner operating on a boardwalk).
- Any business in which at least 75 percent of the previous calendar year wages paid were for work performed during a single calendar quarter.
Seasonal businesses that fall under any of the three categories above will be able to continue under the current minimum wage of $8.85 per hour throughout the year, and will “catch up” to the standard minimum wage for non-seasonal employers by 2028.
- “Small” Businesses, How Small are They? – The newly-enacted law gives the same preferential rate increases to small businesses, as defined by the statute. That statute states that a business is considered a “small employer” if it employs “less than six employees for every working day during each of a majority of the calendar workweeks in the current calendar year and not less than 48 calendar workweeks in the preceding calendar year…” The key word in this definition is “every”, and employers hovering around that number on a day to day basis will need to consider their staffing strategies accordingly in order to avoid noncompliance with this provision of the law.
- Farm Businesses Also Separately Stipulated – Just as small businesses and seasonal businesses above, farm owners will also be subject to the lower minimum wage rate for those whom they employ.
- Teenagers and Students – One of the notable omissions from the exceptions to the $15.00 over six year plan was that of teenagers, who were originally set to be subject to the same exceptions as above. The final legislation called for no such special treatment, and teenagers under eighteen will be eligible for the standard minimum wage under the new law. Students of universities will still be eligible for 85% of the applicable minimum wage for the work which they perform for their campuses.
- What About My Tip? – For employers who employ bartenders, servers, and other professions whose compensation is derived substantially by tips, comparable increases will also take effect. Should an employee’s tip plus his or her increased hourly rate fail to achieve the standard minimum wage per hour, it falls to the employer to compensate the employee for any shortfalls.
- 6. Are There Any Benefits for Employers? – The newly passed legislation did offer tax incentives for businesses who employ workers with disabilities and allowed reduced rates (90% of the minimum wage) for employers who are providing training to new employees. The training is limited to the “first 120 hours of work after hiring the employee in the employment in an occupation in which the employee has no previous similar or related experience.” For anyone thinking to hire employees for three weeks at a time to avoid paying the minimum wage, the legislation also calls for a “good faith effort” to keep the trainee employed following his statutory period, and also discourages the use of this provision to remove currently-employed workers from their positions.
Regardless of where you fall in the categories above, the financial and tax consequences of this legislation are poised to have a substantial impact on businesses and employees alike. To speak about how this legislation will impact you or your business, please contact Anthony Panetta, CPA at acpanetta@capaldireynolds.com.
Article contributed by Anthony Panetta, CPA
Photo by Agê Barros on Unsplash
